Way cleared for improved consumer protections in financial services in the United States

06/28/2010

In a marathon session of more than 21 hours, House and Senate negotiators hammered out a historic overhaul of financial protections last Friday. It is expected that both chambers of Congress will give final approval this week so that US President Obama can sign the bill into law soon.

A new Bureau of Consumer Financial Protection is at the heart of the bill. The new Bureau will oversee consumer financial products such as mortgages, credit cards, and payday loans. The Bureau will be housed in the Federal Reserve and it will have an independent director with reliable funding and full rulemaking authority over a broad range of financial products.

In addition to the Bureau, the bill contains several other reform measures:

All consumers will be able to get free credit scores when they are denied credit because of their credit scores.

An Office of Credit Ratings is established to promote accurate credit ratings and ensure these ratings are not unfairly influenced by conflicts of interests, and the bill allows investors to sue credit agencies.

The Federal Trade Commission, on an expedited basis, can develop and enforce new rules to protect consumers from unfair and abusive auto financing transactions.

US consumer organizations hail the bill. The Consumer Federation of America argues that the “bill marks the biggest transformation of financial regulation in this country since the Great Depression”. And Consumers Union specialist Pamela Banks argues that “The idea of a consumer watchdog was deemed dead on arrival last fall, but that prediction turned out to be completely, blissfully wrong.”

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